III.  Legis. 


I 


H.  R. 


11tb  Assem. 


R  E  P  ©  R 


OF  THE 


COMMITTEE  ON  FINANCE 


RELATIVE  TO 


AN  INDEPENDENT  TREASURY  AND  A  NATIONAL  BANK, 


SUBMITTED  TO 


THE  HOUSE  OF  REPRESENTATIVES, 


DECEMBER  18/1838. 


VANDALIA: 

William  Walters,  Fublio  Printer. 

1839. 


INDEPENDENT  TREASURY— NATIONAL  BANK. 


December  18,  1838. 

Read,  laid  on  the  table,  and  ordered  to  be  printed. 


Mr.  Williams,  from  the  Committee  on  Finance,  made  the  following 

REPORT: 

The  Committee  on  Finance ,  to  which  was  referred  that  part  of  the  Governor's 
inaugural  address  which  relates  to  currency ,  have  had  so  much  thereof  as 
relates  to  the  establishment  of  an  Independent  Treasury  and  to  a  National 
Bank  under  consideration ;  and  a  majority  of  said  committee  have  directed 
me  to  make  the  following  report: 

In  reviewing  the  history  of  the  United  States,  we  find  that  the  employ¬ 
ment  of  banks,  as  fiscal  agents,  in  keeping  and  disbursing  the  public 
moneys,  is  a  practice  almost  coeval  with  the  very  organization  of  our 
Government.  It  was  commenced  during  the  administration  of  Washing¬ 
ton,  the  first  President  of  the  Union,  and  was  continued  without  inter¬ 
mission,  through  all  the  changes  of  administration,  until  the  retirement  of 
President  Jackson  from  office. 

For  the  greater  part  of  this  time,  the  first  Bank  of  the  United  States, 
chartered  by  Congress  in  1791,  and  approved  by  President  Washington, 
and  the  second  United  States  Bank,  chartered  in  1816,  and  approved  by 
President- Madison,  were  the  agents  for  the  discharge  of  these  duties: 
but  during  two  periods,  the  banks  chartered  by  the  several  States  were 
substituted  for  a  National  Bank,  viz:  from  the  expiration  of  the  charter 
of  the  first  United  States  Bank,  in  1811,  until  the  creation  of  the  second, 
in  1816;  and  from  the  removal  of  the  deposites  from  the  latter  bank,  in 
1833,  until  the  end  of  President  Jackson’s  term  of  office. 

The  practice,  however,  of  employing  some  banks,  either  State  or  Na¬ 
tional,  as  fiscal  agents  for  the  General  Government,  was  uniformly  and 
constantly  followed  by  all  the  Presidents  until  the  accession  of  Mr.  Van 
Buren  in  1837. 

During  this  period  of  nearly  half  a  century,  our  prosperity  was  unex¬ 
ampled.  The  increase  of  our  wealth  and  population,  the  development 
of  our  resources,  and  our  improvement  in  all  the  useful  pursuits  of  civil¬ 
ized  life,  were  extensive  and  rapid,  beyond  all  parallel  in  the  previous 
annals  of  the  world.  Vast  tracts  of  country  were  reclaimed  from  the 
wilderness — forests  were  levelled — prairies  converted  into  fertile  fields — 
roads  opened—- rivers  explored,  and  the  obstructions  removed  which  im¬ 
peded  their  navigation.  The  increase  of  agricultural  products  promoted 


4 


the  expansion  of  other  branches  of  industry.  Manufactures  of  various 
sorts  sprang  up  and  flourished;  our  commerce  was  pushed  to  every  quar¬ 
ter  of  the  globe;  our  sails  whitened  every  sea;  and  the  American  flag 
floated  in  every  breeze,  from  the  Arctic  ocean  to  the  southernmost  shores 
of  the  Pacific.  The  Old  World  saw  with  surprise  and  admiration  our 
infant  colonies,  but  recently  formed  into  a  union  of  States,  advancing  with 
giant  strides  to  the  rank  of  a  mighty  nation. 

Thus  it  will  be  seen,  from  this  brief  history  of  the  union  which,  until 
recently,  existed  between  the  General  Government  and  banks,  either 
State  or  National — and  of  the  extraordinary  and  unprecedented  degree  of 
prosperity  which  accompanied  us  in  our  onward  march  during  the  period 
of  this  union — that  a  system,  under  which  we  have  increased  from  a  mere 
handful  of  people  to  a  most  powerful  confederacy,  and  under  which  we 
have  attained  a  condition  so  flourishing,  cannot  in  itself  be  “radically  and 
fundamentally  defective .”  It  is,  therefore,  a  matter  of  no  surprise,  that  a 
proposition  to  sever  a  union  so  useful  and  so  beneficial  should  receive,  at 
its  very  outset,  a  most  decided  and  signal  rebuke. 

The  first  proposition  for  such  a  severance  was  submitted  by  Mr.  Gam¬ 
ble,  of  Georgia,  during  the  session  of -Congress  held  in  the  winter  of 
1834  and  1835.  This  was  as  follows: 

“ Resolved ,  That  the  Secretary  of  the  Treasury  be  directed  to  commu¬ 
nicate  to  this  House,  whether,  in  his  opinion,  it  is  practicable  or  conve¬ 
nient  for  that  Department  to  collect,  safely  keep,  and  disburse  the  public 
moneys  of  the  United  States,  without  the  agency  of  a  bank  or  banks; 
and,  if  so,  to  report  to  this  House  the  best  mode,  in  his  opinion,  by  which 
that  object  can  be  accomplished.” 

On  motion  of  M r.  M’Kim,  a  member  of  the  administration  party,  the 
resolution  was  laid  upon  the  table. 

Mr.  Gamble,  afterwards,  on  the  6th  day  January,  1835,  introduced  the 
following  resolution: 

“ Resolved ,  That  the  Secretary  of  the  Treasury  be  directed  to  digest,  ( 
and  prepare,  and  communicate  to  this  House,  a  detailed  plan  by  which 
the  public  revenue  of  the  United  States  may  be  collected,  safely  kept, 
and  disbursed,  without  the  agency  of  a  bank  or  banks,  either  State  or 
National.” 

On  the  11th  day  of  February,  at  the  same  session,  the  bill  regulating 
the  deposite  of  the  money  of  the  United  States  in  certain  local  banks, 
being  under  consideration,  a  motion  was  made  by  Mr.  Robertson,  “that 
the  said  bill  be  recommitted  to  the  Committee  of  Ways  and  Means,  with 
instructions  so  to  amend  the  same  as  to  dispense  with  the  agency  or  in¬ 
strumentality  of  bank?  in  the  fiscal  operations  of  the  Government.” 

Mr.  Gordon  moved  to  amend  the  said  bill,  and  strike  out  all  thereof 
after  the  enacting  words,  and  insert — 

“Sec.  1.  That  from  and  after  the  day  of  in  the  year  , 
the  collectors  of  the  public  revenue,  at  places  where  the  sums  collected 
shall  not  exceed  the  sum  of  dollars  per  annum,  shall  be  the  agents 

of  the  Treasurer,  to  keep  and  disburse  the  same,  and  be  subject  to  such 
rules  and  regulations,  and  give  such  bond  and  security,  as  he  shall  pre¬ 
scribe  for  the  faithful  execution  of  their  office;  and  shall  receive,  in  ad¬ 
dition  to  the  compensation  now  allowed  by  law,  per  centum  on  the 

sums  disbursed,  so  that  it  does  not  exceed  the  sum  of  dollars  per 

annum.” 


5 


“Sec.  2.  And  be  it  further  enacted ,  That  at  all  places,  where  the  amount 
of  public  revenue  collected  shall  exceed  the  sum  of  dollars  per  an¬ 

num,  there  shall  be  appointed  by  the  President,  by  and  vrith  the  advice 
and  consent  of  the  Senate,  receivers  of  the  public  revenue,  to  be  agents 
of  the  Treasurer,  who  shall  give  such  bond  and  security,  to  keep  and 
disburse  the  revenue,  and  be  subject  to  such  rules  and  regulations,  as  the 
Treasurer  shall  prescribe;  and  shall  receive  for  their  services  per 

centum  per  annum  on  the  sums  disbursed:  Provided  it  does  not  exceed 
the  sum  of  dollars  per  annum.” 

“Sec.  3.  And  be  it  further  enacted ,  That  from  and  after  the  day 

of  ,  the  whole  revenue  of  the  United  States  derived  from  customs, 

lands,  or  other  sources,  shall  be  paid  in  the  current  coin  of  the  United 
States.** 

The  yeas  and  nays  were  taken  upon  these  several  propositions,  and,  by 
overwhelming  majorities,  they  were  all  rejected.  Among  those  who 
were  opposed  to  their  adoption,  we  find  the  names  of  C.  C.  Cambreleng, 
Zadok  Casey,  Richard  M.  Johnson,  Wm.  L.  May,  Henry  A.  Muhlen¬ 
berg,  James  K.  Polk,  John  Reynolds,  and  (with  but  very  few  exceptions) 
all  the  members  friendly  to  the  administration  of  President  Jackson. 
Every  attempt  to  effect  a  separation  between  Panic  and  State  was  steadily 
resisted  by  the  friends  of  the  party  in  power.  The  scheme  wras  disap¬ 
proved  by  President  Jackson  himself,  and  the  official  paper  at  Washing¬ 
ton  denounced  it,  as  subversive  of  the  settled  practice  of  the  Government, 
as  tending  to  increase,  to  an  alarming  extent,  the  power  of  the  Executive, 
and  exposing  the  public  treasure  to  be  plundered  by  a  hundred  hands, 
where  one  could  not  before  reach  it. 

From  that  time  until  the  special  session  of  Congress,  in  September, 
1837,  after  the  accession  of  Mr.  Van  Buren,  the  project  was  laid  asleep; 
and  the  Stale  banks  continued  to  be  employed  as  the  fiscal  agents  of  the 
Government. 

At  the  special  session  just  referred  to,  the  system  now  familiarly  known 
as  the  Independent  Treasury  or  Sub-treasury  system,  was  first  brought 
forward  as  an  administration  measure.  The  party  which,  under  Presi¬ 
dent  Jackson’s  administration,  had  voted  against  the  proposition  of  Messrs. 
Gamble,  Gordon,  and  Robertson,  were  now'  divided.  A  majority  of  the 
party,  coinciding  with  President  Van  Buren,  supported  the  measure,  while 
a  considerable  minority  adhered  to  their  original  view  of  the  subject. 

The  bill  w'as  defeated  at  the  special  session.  It  was  again  brought  up 
at  the  last  regular  session,  and  again  lost — the  Conservative  party,  as  they 
have  been  called,  remaining  firm  in  their  opposition  to  it. 

Your  committee  do  not  wish,  to  be  understood  as  resisting,  wfithout  in¬ 
quiry  or  examination,  all  changes  in  the  fiscal  affairs  of  the  Government. 
They  are  not  hostile  to  such  changes  as  may  be  shown  to  be  necessary 
and  proper;  but,  in  view  of  the  high  degree  of  prosperity  which  the 
American  nation  has  enjoyed  under  the  system  pursued  since  the  founda¬ 
tion  of  the  Government  to  the  present  day — when  it  is  proposed  to  for¬ 
sake  that  system  and  embrace  a  new  and  untried  plan — they  ask,  what 
are  the  grounds,  what  are  the  reasons  and  considerations  which  render 
this  change  necessary  and  proper? — and  this  inquiry  is  deemed  the  more 
important,  because  of  the  signal  condemnation  passed  upon  this  scheme 


6 


during  the  session  of  Congress  in  1834-35,  above  referred  to,  with  the 
concurrence  of  some  of  those  who  are  now  advocating  its  adoption. 

If  the  example  of  European  nations  be  quoted,  in  which  plans  have 
been  adopted  similar  to  that  under  consideration — we  ask  if  there  be  any 
thing  in  the  character  of  their  governments,  or  the  condition  of  their 
subjects,  which  should  excite  the  envy  or  challenge  the  imitation  of  the 
American  people? 

It  may  be  said  that  it  is  improper  to  deposite  with  the  banks  the  pub¬ 
lic  money,  lest  it  be  used  as  a  fund  for  banking  operations.  In  the  opin¬ 
ion  of  your  committee  a  sufficient  answer  to  this  objection  is  to  be  found 
in  a  recent  vote  of  this  House,  declaring  it  inexpedient  to  make  the  col¬ 
lectors  of  our  State  revenue  the  custodiers  and  disbursers  of  the  same. 
That  vote  exhibits,  on  the  part  of  this  House,  a  preference  for  banks, 
over  collecting  officers,  as  fiscal  agents  for  the  safe-keeping  and  disburs¬ 
ing  of  moneys,  so  far  as  our  State  revenues  are  concerned:  and  your  com¬ 
mittee  are  unable  to  perceive  any  difference  of  principle,  whether  the 
policy  under  consideration  relates  to  the  revenues  of  this  State  or  to  those 
of  the  United  States. 

A  favorite  argument  in  behalf  of  this  scheme  is,  that  it  is  a  divorce  of 
Bank  and  State,  and  the  creation  of  an  Independent  Treasury. 

To  this  your  committee  answer  that  it  will  divorce  Bank  and  State 
only  to  cement  a  union  still  more  dangerous — the  union  of  political  influ¬ 
ence  with  the  influence  of  money — the  Executive  patronage  with  the 
control  of  the  public  purse.  It  will  create  a  treasury,  independent  (it  is 
true)  of  the  people,  and  of  their  representatives,  but  dependent  upon  the 
President,  the  Secretary  of  the  Treasury,  and  thousands  of  subordinate 
officers,  who  hold  their  appointments  at  the  discretion  of  the  President: 
among  whom  are  to  be  included  numerous  secret  agents  who,  under  color 
of  examining  into  the  accounts  of  the  collecting  and  disbursing  officers, 
may  be  sent  into  every  part  of  the  Union  to  operate  upon  elections. 

Another  fruitful  topic  of  declamation  with  the  advocates  of  the  Sub¬ 
treasury  system  is,  the  supposed  insecurity  of  the  public  money  in  the 
deposite  banks;  and  this  is  especially  alluded  to  in  that  part  of  Governor 
Carlin’s  message  which  has  been  lelerred  to  this  committee.  In  refuta¬ 
tion  of  this  idea,  your  committee  deem  it  only  necessary  to  quote  from  a 
report  made  by  Mr.  Woodbury,  then  and  now  Secretary  of  the  Treasury, 
during  the  session  of  Congress  of  1834  and  1835.  He  says — 

“It  is  a  singular  fact,  in  praise  of  this  description  of  public  debtors — 
the  selected  banks — that  there  is  not  now  due  on  deposite,  in  the  whole 
of  them,  which  have  ever  stopped  payment,  from  the  establishment  of  the 
constitution  to  the  present  moment,  a  sum  much  beyond  what  is  nowduelo 
the  United  States  from  one  mercantile  firm  that  stopped  payment  in  1825 
or  1826,  and  of  whom  ample  security  was  required,  and  supposed  to  be 
taken,  under  the  responsibility  of  an  oath. 

“If  we  include  the  whole  present  dues  to  the  Government  from  dis¬ 
credited  banks,  at  all  times,  and  of  all  kinds,  whether  as  depositories  or 
not.  and  embrace  even  counterfeit  bills,  and  every  other  species  of  una¬ 
vailable  funds  in  the  Treasury,  they  will  not  exceed  what  is  due  from  two 
such  firms.  Of  almost  one  hundred  banks,  not  depositoiies,  which,  during 
all  our  wars  and  commercial  embarrassments,  have  heretofore  failed  in 
any  part  of  the  Union,  in  debt  to  the  Government,  on  their  bills  or 


7 


otherwise,  it  will  be  seen  by  the  above  table  that  the  whole  of  them,  ex¬ 
cept  seventeen,  have  adjusted  every  thing  which  they  owed,  and  that  the 
balance  due  from  those,  without  interest,  is  less  than  thirty-two  thousand 
dollars. 

u Justice  to  the  State  banking  institutions  as  a  body,  whose  conduct,  in 
particular  cases,  has  certainly  been  objectionable,  but  whose  injuries  to 
the  Government  have  been  almost  incredibly  exaggerated ,  and  whose  great 
benefits  to  it,  both  during  the  existence  of  our  two  National  Banks,  and 
while  neither  of  them  existed,  have  been  almost  entirely  overlooked,  has 
led  me  to  make  this  scrutiny,  and  submit  its  results,  under  a  hope  that  it 
I  will,  in  some  degree,  not  only  vindicate  them  from  much  unmerited  cen¬ 
sure,  but  justify  this  department  for  the  confidence  it  formerly,  and,  in 
the  great  improvement  of  their  condition  and  of  the  financial  affairs  of 
the  Government,  has  recently  reposed  in  them.  Under  these  circum¬ 
stances,  so  very  favorable,  with  the  new  security  and  examinations  pro- 
P  vided  for,  your  former  small  losses  by  them,  in  keeping  and  paying  over 
the  public  revenue,  under  circumstances  so  very  adverse,  are  compared 
with  our  large  losses,  either  in  collecting  or  disbursing  that  revenue,  their 
present  safety  seems  to  be  as  great  as  is  consistent  with  the  usual  opera¬ 
tions  of  the  paper  system,  or  with  the  credit  which  must  always  be  entrusted 
l  by  Government ,  in  some  way  or  other ,  to  agents  of  some  kind ,  in  keeping 
the  public  money.  In  considering  their  safety,  it  should  be  constantly  re¬ 
collected  that  the  owners  and  managers  of  banks,  when  properly  regu¬ 
lated  by  legislative  provisions  in  their  charters,  like  other  individuals,  in¬ 
terested  to  transact  business  securely,  are  desirous  of  making  and  not  losing 
money,  and  that  these  circumstances,  with  the  preference,  in  case  of  fail¬ 
ure,  belonging  to  depositors  and  holders  of  their  bills  over  the  stockhold¬ 
ers,  united  with  the  security,  if  not  priority,  given  to  the  Government, 
render  them,  in  point  of  safety,  generally,  much  superior  to  individual 
agents  of  the  United  States.” 

>  The  report  from  which  the  foregoing  quotations  are  made,  was  the 

basis  of  the  late  arrangement  between  the  Government  and  the  deposite 
banks. 

What  amount  of  loss  has  been  sustained  by  the  Government  since  the 
suspension  of  specie  payments  by  those  institutions,  your  committee  have 
no  exact  means  of  ascertaining;  but  from  the  best  sources  of  information 
within  their  reach,  they  are  satisfied  that  the  sum  is  very  inconsiderable. 

And  they  deem  it  not  amiss  to  insert  here  a  passage  relating  to  these 
banks,  from  the  message  of  President  Van  Buren  to  the  present  session 
of  Congress,  on  the  3d  December,  1838.  He  says:  “It  is  no  more  than 
just  to  the  banks  to  say  that,  in  the  late  emergency,  most  of  them  firmly 
resisted  the  strongest  temptations  to  extend  their  paper  issues,  when  ap¬ 
parently  sustained  in  a  suspension  of  specie  payments  by  public  opinion, 
even  though  in  some  cases  invited  by  legislative  enactments.  To  this 
honorable  course,  aided  by  the  resistance  of  the  General  Government. 

*  V 

acting  in  obedience  to  the  constitution  and  laws  of  the  United  States,  to 
the  introduction  of  an  irredeemable  paper  medium,  may  be  attributed,  in 
a  great  degree,  the  speedy  restoration  of  our  currency  to  a  sound  state* 
and  the  business  of  the  country  to  its  wonted  prosperity.” 


8 


Your  committee  are  of  opinion  that  this  testimony  of  the  President  to 
the  honorable  and  patriotic  conduct  of  the  banks  during  “the  late  emer¬ 
gency,”  furnishes  a  strong  aigument  in  their  behalf,  in  addition  to  the 
considerations  urged  by  Mr.  Woodbury  in  the  report  already  quoted; 
while  the  force  and  truth  of  some  of  these  considerations  have  been  abun¬ 
dantly  demonstrated  by  the  frequent  and  extensive  defalcations  of  “indi¬ 
vidual  agents  of  the  United  States.” 

The  report  of  the  Secretary  of  the  Treasury  to  Congress,  at  its  last 
session,  presented  a  surprising  list  of  defaulters  among  the  collectors  and 
receivers  of  the  public  moneys;  and,  very  recently,  the  enormous  defal¬ 
cation  of  the  collector  at  New  York,  amounting  (as  reported)  to  one  mil¬ 
lion  two  hundred  thousand  dollars,  has  been  thought  w'orthy  of  “particu¬ 
lar  reference”  to  Congress  by  Mr.  Van  Buren. 

Your  committee,  therefore,  after  mature  consideration  of  those  passages 
ox  Governor  Carlin’s  message  which  have  been  referred  to  them,  and  of 
all  the  important  subjects  connected  therewith,  beg  leave  to  submit  the 
following  resolutions,  viz: 

Resolved  by  the  General  Assembly  of  the  State  of  Illinois ,  That  the  pres¬ 
ent  condition  of  the  currency  and  the  interests  of  the  country,  generally, 
do  not  seem  to  require  the  establishment  of  an  Independent  Treasury, 
and  the  collection  and  disbursement  of  the  public  revenue  in  specie. 

Resolved ,  That  our  Senators  in  Congress  be  instructed,  and  our  Repre¬ 
sentatives  requested,  to  vote  against  any  law  or  resolution  having  for  its 
object  the  adoption  of  the  Independent  or  Sub-treasury  system,  in  any 
iorm  whatever. 

Resolved ,  further ,  That  they  be  instructed  to  use  all  their  efforts  to  pre¬ 
vent  the  x'echarter  of  the  late  National  Bank,  or  the  chartering  of  a  Na¬ 
tional  Bank  of  any  kind.  t 

Resolved,  That  the  Governor  be  requested  to  transmit  a  copy  of  the 
foregoing  resolutions  to  each  of  our  Senators  and  Representatives  in 
Congress. 


REPORT  OF  THE  MINORITY. 


December  18,  1838. 

Read,  laid  on  the  table,  and  ordered  to  be  printed. 


Mr.  Walker,  of  Vermilion,  from  the  minority  of  the  Committee  on; 

Finance,  made  the  following 

REPORT: 

The  minority  of  the  Committee  on  Finance ,  to  which  was  referred  that  paH 
of  the  Governor’s  inaugural  address  relating  to  the  currency,,  beg  leave  to 
report : 

That,  in  an  investigation  of  the  matter,  they  were  compelled  to  differ 
with  the  majority  of  the  committee.  This  difference,  however,  they  are 
willing  to  concede  as  an  honest  one  on  the  part  of  the  majority,  as  they 
wish  to  have  the  same  accorded  to  them  in  the  minority. 

The  committee  having  decided  that  it  is  neither  necessary  nor  proper 
to  establish  a  National  Bank,  this  inquiry  must  therefore  be  limited  to  the 
two  remaining  propositions,  which  are,  substantially,  whether  the  Govern¬ 
ment  shall  renew  a  connection  with  the  State  Banks — a  connection  dis¬ 
solved  by  the  acts  of  the  banks  themselves — or  whether  some  plan  cannot 
be  adopted  better  for  the  banks,  the  Government,  and  the  people. 

The  first  inquiry  that  naturally  presents  itself  is,  whether  our  paper- 
money  banks  possess  any  peculiar  right  to  be  the  depositories  of  the 
General  Government.  The  history  of  our  banking  institutions  shows, 
conclusively,  that  they  are  established,  for  the  most  part,  by  those  who 
wish  to  borrow,  and  not  by  those  who  wish  to  lend;  and  that  their  loans, 
so  far  from  being  extended  alike  to  all  responsible  persons,  are  confined 
to  a  favorite  and  monopolizing  few.  This  remark  is  made  for  the  purpose 
of  showing  that  banks  have  no  right  to  be  considered  institutions  estab¬ 
lished  for  the  general  good  of  all;  on  the  contrary,  that  all  the  good  they 
produce  is  confined  to  the  directors,  stockholders,  and  their  favorite  friends; 
while  all  the  evils  they  engender  are  distributed,  with  insidious  art,  among 
the  rest  of  community.  \ 

In  their  strictures  on  banking,  generally,  your  committee  would  not  be 
understood  as  expressing  an  opinion  in  relation  to  our  own  State  institu¬ 
tions,  which  are  constituted  differently  from  most  other  banking  institu¬ 
tions,  and  to  aid  the  State  in  particular  emergencies;  but  they  cannot  say 
they  were  created  as  a  rightful  receptacle  of  the  funds  of  the  General 
Government.  In  elucidation  of  .this  part  of  the  subject,  the  committee 
would  call  attention  to  the  following  abstract  from  the  discount  sheet  of 
of  the  principal  bank  at  Philadelphia,  on  the  9th  of  April,  1832: 


10 


“The  whole  amount  of  notes  discounted,  was  $7,939,679  52;  of  which, 
more  than  two-thirds  was  loaned  to  ninety  persons;  more  than  three  mil¬ 
lions  of  dollars  were  in  the  hands  of  seventeen  individuals,  and  nearly  one- 
seventeenth  part  in  the  hands  of  one  individual,  leaving  only  $529,974  26 
to  be  divided  among  the  rest  of  the  community.”  And  this  by  an  institution 
called  National . 

If  we  had  the  same  means  of  getting  at  what  are  called  State  banks, 
we  should  probably  find  that  their  loans  were  somewhat  in  the  same  pro¬ 
portion,  and  narrowed  down  to  the  smallest  circle.  Instances  have  occur¬ 
red  of  bank  presidents  obtaining  loans,  from  the  institutions  over  which 
they  presided,  to  three  times  the  amount  of  their  capital;  and  numerous 
instances  are  oh  record,  where  the  whole  loanable  capital  of  the  bank 
has  been  absorbed  by  two,  three,  or  perhaps  a  dozen  individuals. 

A  forcible  reason  for  the  Government  refusing  to  receive  paper  money, 
or  to  deposite  her  funds  in  the  vaults  of  the  bank,  is  to  be  found  in  the 
fact  that  a  number  of  these  institutions  have  not  yet  resumed  specie  pay¬ 
ments,  and  the  reasonable  doubt  that  exists  as  to  the  ability  of  many  which 
have  resumed  to  continue.  The  claim,  therefore,  which  these  institutions 
set  up,  of  being  established  and  conducted  for  the  public  good,  is  not 
borne  out  by  the  facts;  and  it  follows  that  they  have  no  particular  right 
to  the  favor  of  the  General  Government. 

The  next  consideration  that  presents  itself  is,  the  safety  of  these  insti¬ 
tutions  as  depositories  of  the  General  Government.  From  the  tables  of 
Mr  Gallatin,  it  would  appear  that  one  hundred  and  sixty-five  banks  failed 
from  the  1st  of  January,  1811,  to  the  1st  of  January,  1830.  At  that  time 
there  were  three  hundred  and  thirty  banks  in  operation;  and  as  no  alter¬ 
ation  has  been  made  in  the  system — as  the  principles  on  which  they  are 
founded  and  conducted  are  the  same  now  as  then — we  must  naturally  look 
for  like  results;  and  that  of  the  eight  hundred  or  more  banks  nowin  ex¬ 
istence,  a  third,  or  perhaps  more,  will  be  found,  in  the  course  of  the  next 
fifteen  or  twenty  years,  recorded  in  the  list  of  broken  banks. 

Experience  should  teach  wisdom;  and  the  fact  that  Ihe  General  Govern¬ 
ment  was  twice  thrown  on  the  verge  of  bankruptcy,  through  a  connection 
with  the  State  banks,  should  of  itself,  be  sufficient  to  deter  us  from  adven¬ 
turing  on  such  an  expedient  again. 

In  1816,  the  Government,  with  twenty-two  millions  of  paper  money  in 
her  vaults,  was  forced  to  borrow  money  to  pay  the  interest  on  the  Na¬ 
tional  debt;  and  in  1837,  with  upwards  of  thirty  millions  of  money  in  the 
State  banks,  the  Government  was  compelled  to  resort  to  the  doubtful  ex¬ 
pedient  of  issuing  Treasury  notes  in  order  to  meet  ordinary  demands.  Had 
this  money  been  deposited  with  individuals,  and  had  they  proved  as  re¬ 
creant  to  their  trusts  as  the  banks  have,  no  one  would  have  thought  of 
employing  them  again.  The  misfortune  is,  that  the  public  mind  makes  a 
distinction  between  the  acts  of  corporations  and  the  acts  of  individuals; 
and  that  which  would  drive  an  individual  from  the  public  service  with 
disgrace,  is  looked  upon  as  an  additional  claim  to  public  favor  when  com¬ 
mitted  by  a  corporation. 

The  conclusion,  then,  of  the  committee  is,  that  the  banks  having  twice 
proved  recreant  to  their  trust,  added  to  the  certainty  that  more  or  less  of 
them  will,  in  the  course  of  time,  fail  to  meet  their  engagements,  warrant 
the  assertion  that  they  are  not  safe  depositories  of  the  public  revenue. 


11 


Another  consideration  connected  with  this  part  of  the  subject  is  the 
availability  of  the  fund  so  deposited.  It  will  be  admitted,  it  is  presumed, 
that  the  principal  object  the  banks  have  in  wishing  to  be  the  depositories 
of  the  nation,  is  for  the  purpose  of  increasing  their  loanable  capital.  The 
money  deposited  with  them  would  form  the  basis  on  which  they  could 
extend  their  discounts;  and  so  long  as  the  Government  has  no  use  for  the 
moneys,  so  long  the  banks  become  liberal — in  other  wmrds,  expand ;  but 
if  the  Government  call  on  them  for  payment,  they  must  immediately  con¬ 
tract  their  discounts,  and  thus  cause  distress  in  the  money  market.  The 
alternative  that  presents  itself  is,  either  delay  to  the  Government  or  em¬ 
barrassment  to  their  customers. 

After  the  passage  of  the  law  distributing  the  surplus  revenue  among 
the  States,  it  became  the  duty  of  the  Secretary  of  the  Treasury  to  draw 
on  the  banks  in  New  York,  where  the  greater  part  of  the  revenue  is  col¬ 
lected,  for  a  large  amount  of  funds.  As  these  funds  had  been  used  for 
the  purpose  of  discounting,  they  could  not  be  made  available  without 
distressing  that  commercial  community;  and  a  deputation  visited  Wash¬ 
ington  for  the  purpose  of  procuring  a  delay  in  the  time  of  payment  of 
their  just  debts. 

The  paramount  interest  of  the  country  demands  that  whatever  money 
is  collected  from  the  people  for  the  use  of  the  Government  should  be  so 
kept  as  to  be  always  available  without  producing  any  alteration  in  the 
monetary  affairs  of  the  people. 

.  In  case  of  a  war  with  any  foreign  power,  the  panic  in  the  commercial 
market  would  be  a  signal  for  the  banks  to  suspend  specie  payments;  and 
no  matter  what  amount  of  Government  funds  might  be  in  their  vaults,  the 
war  would  have  to  be  carried  on  with  an  irredeemable  currency,  or  our 
country  left  a  prey  to  the  enemy.  Another  danger  to  be  apprehended 
is,  that  having  the  means  of  war  under  their  control,  they  might  withhold 
those  means,  and  compel  the  Government  to  resort  to  such  measures  as 
they  might  choose  to  dictate. 

The  committee,  therefore,  do  not  concede  that  placing  the  funds  of  the 
Government  in  the  State  banks  is  putting  them  where  they  will  be  most 
available  in  time  of  emergency.  The  expansions  and  contractions  of  the 
banks  are  not  one  of  the  least  evils  of  the  banking  system,  as  at  present 
organized;  and  this  evil  has  been,  and  will  be,  greatly  increased  by  the 
banks  being  made  the  depository  of  the  General  Government.  When 
the  revenue  has  accumulated  to  any  considerable  amount,  the  banks  feel 
themselves  free  to  enlarge  their  discounts,  in  other  words,  expand;  money 
becomes  plenty,  the  price  of  every  thing  increases  in  value,  with  the  ex¬ 
ception  of  labor,  and  an  artificial  stimulus  is  given  to  every  department  of 
trade  known  to  our  country;  but,  if  the  Government  draw  largely  on  them, 
they  are  forced  to  contract  their  discounts;  money  becomes  scarce;  panic 
and  pressures  are  the  order  of  the  day;  laborers,  whose  .cost  of  living  has 
been  doubled  by  the  expansion  of  prices,  are  now  thrown  entirely  out  of 
employment,  and  reduced  to  want — find  shelter  in  the  almshouse,  or,  per¬ 
chance,  acquire  a  precarious  living  by  violation  of  law.  Happily  for  the 
people  of  Illinois,  they  know  not  what  real  poverty  is.  Here,  labor  and 
economy  will  soon  render  a  man  partially  independent  of  the  mutations 
and  changes  that  occur  so  frequently  in  the  other  parts  of  the  Union. 
The  ease  with  which  land  can  be  acquired;  the  smnll  amount  of  labor 


12 


necessary  to  make  the  earth  produce  her  fruits,  give, to  the  industrious  and 
laboring  inhabitants  of  our  State,  advantages  not  possessed  by  similar 
inhabitants  of  the  older  States.  It  is  asserted,  and  it  is  believed  on  good 
authority,  that  upwards  of  ten  thousand  people  were  thrown  out  of  em¬ 
ployment  in  the  city  of  New  York  alone,  by  the  suspension  of  specie  pay¬ 
ments.  As  the  price  of  labor  had  not  increased  with  the  price  of  the 
necessaries  of  life,  these  people  had  no  means  of  earning  more  than  a  bare 
subsistence,  and,  consequently,  when  thrown  out  of  employment,  were 
cast  penniless  on  the  world. 

The  great  incentive  to  industry,  economy,  and  rectitude  of  conduct,  is 
the  rational  prospect  that  the  labor  of  our  youth  will  support  the  feeble¬ 
ness  of  age;  but,  by  the  ever  changing  value  of  our  currency,  which,  in 
its  turn,  affects  the  value  of  every  thing  else,  that  income,  winch  would  at 
one  time  enable  the  decrepid  and  the  aged  to  live  in  ease  and  comfort, 
will  not  at  another  time  procure  the  necessaries  of  life.  These  frequent 
contractions  and  expansions  are  felt  by  the  poor  in  a  greater  or  less  de¬ 
gree,  as  well  as  by  all  classes  of  society,  leading  to  over-trading,  specula¬ 
tion,  and  ultimate  ruin. 

To  check  this  evil,  nothing  would  have  so  great  an  effect  as  for  the 
Government  to  refuse  receiving  bank  paperin  payment  for  the  public  dues. 
The  Union  of  the  purse  and  the  sword  have,  in  all  countries,  and  at  all 
times,  been  considered  dangerous;  and  a  union  of  this  kind,  cemented  b}r 
an  unnatural  and  unholy  alliance  between  the  General  Government  and 
the  State  banks,  would,  in  the  opinion  of  your  committee,  be  productive  of 
incalculable  mischief,  and  ultimate  bankruptcy  to  the  Government. 

There  are  at  this  time  about  eight  hundred  State  banks  in  existence; 
and,  allowing  that  the  average  namber  of  persons  immediately  interested 
in  each  of  them  is  five  hundred,  wrc  then  have  an  army  of  four  hundred 
thousand  persons  directly  interested  in  promoting  the  prosperity  of  the 
banks,  and  consisting  of  that  class  of  the  community  who  possess  the 
greatest  influence  in  society.  Amongst  them  may  be  found  the  restless 
politician,  the  heartless  speculator,  and  all  those  who  subsist  upon  the 
unordered  results  of  chance — the  precarious  favors  of  every  varying  pro¬ 
vidence — wrho  centre  around  the  banks  as  the  only  source  of  hope  against 
that  which  they  call  degradation  of  honest  labor.  If,  to  the  number  which 
we  have  already  named,  wre  add  the  number  of  official  agents  which  an 
administration  might  bring  into  the  field,  there  is  no  party,  no  matter  howr 
honest  their  intentions — how  holy  their  cause — but  wrnuld  be  annihilated 
in  a  contest  with  such  an  allied  powrer  as  this. 

The  outlines  of  the  Independent  Treasury  system  were  first  suggested 
by  Mr.  Jefferson,  in  a  letter  to  Mr.  Gallatin,  thirty-six  years  since,  and, 
so  far  from  its  being  a  new  and  untried  experiment,  its  features  are  in  the 
main  the  same  as  those  which  have  governed  the  United  States7  Mint — 
almost  the  only  fiscal  agent  of  the  Government  which  has  been  conducted 
wffthout  loss  to  the  Government,  or  injury  to  the  people. 

The  most  prominent  principles  of  the  system  are,  that  the  Government 
shall  gradually  disconnect  itself  from  the  State  banks,  by  requiring,  on  the 
commencement  of  the  system,  one-sixth  part  of  the  revenue  to  be  paid  in 
gold  and  silver,  another  sixth  part  to  be  added  from  year  to  year,  until  the 
time  shall  arrive  wdien  no  otiier  currency  shall  be  received  or  disbursed, 
but  that  known  to  the  constitution — “a  gold  and  silver  currency”  being,  in 


13 


the  words  of  Daniel  Webster,  “the  law  of  the  land  at  home,  and  the  law 
of  the  world  abroad.”  The  Treasurer  of  the  United  States,  the  Treasurer 
of  the  Mint  at  Philadelphia  ard  New  Orleans,  public  receivers  at  Boston, 
New  York,  Charleston,  and  St.  Lonis,  collectors  of  the  customs  at  the 
remaining  sea-port  towns,  and  the  receivers  of  the  land  offices,  constitute 
the  fiscal  agents  of  the  Government. 

In  order  to  prevent  fraud  and  defalcation,  many  salutary  checks  and 
guards  are  provided,  and  the  use  or  embezzlement  of  the  public  funds, 
by  any  of  the  receivers,  is  declared  felony,  and  subjects  the  offender  to 
imprisonment.  But  six  additional  officers  are  required  to  put  the  system 
in  operation,  at  the  expense  of  sixteen  thousand  five  hundred  dollars  per 
annum.  Such  are  the  plain  and  practicable  provisions  of  the  Independent 
Treasury  system — a  system  that  has  been  in  partial  operation,  but  with¬ 
out  the  proper  checks  and  guards,  from  the  commencement  of  the  Govern¬ 
ment — a  system  that  pla.ces  in  the  hands  of  Government  officers  no  new 
or  dangerous  powers — a  system  founded  on  the  sound  principle,  that  the 
Government  should  keep  its  money  in  its  own  hands,  for  its  own  use,  col¬ 
lecting  no  more  from  the  people  than  is  necessary  for  the  wise  and  eco¬ 
nomical  administration  of  its  affairs.  The  safety  of  the  funds,  and  the 
certainty  that  they  would  always  be  available,  are  much  greater  than  in 
banks.  The  officers  of  the  Government  and  the  officers  of  the  banks 
are,  or  should  be,  selected  for  their  probity  and  intelligence;  and  there  is 
no  reason  to  suppose  that  one  is  more  liable  to  stray  from  the  paths  .of 
honesty  than  the  other.  A  temptation  to  commit  robberies  on  the  ex¬ 
chequer  of  the  nation  is  no  greater  than  the  temptation  to  filch  from  the 
vaults  of  the  banks — the  advantages,  even  in  this  respect,  being  on  the 
side  of  the  Independent  Treasury  system;  the  accounts  being  so  lew  and 
simple  as  scarcely  to  admit  of  false  entries  without  the  certainty  of  detec¬ 
tion.  The  dangers  from  fire  and  robbery  are  less,  as  the  precious  metals, 
though  melted,  would  still  retain  their  intrinsic  value;  and  the  difficulties 
of  carrying  off  and  concealing  gold  and  silver  are  much  greater  than  pur¬ 
loining  and  secreting  paper  money. 

There  is  still  one  great  and  important  point  in  favor  of  this  system;  it 
is,  that  the  General  Government  can  always  draw  for  its  funds  to  meet  any 
exigency  that  may  arise,  without  interfering  with  the  monetary  affairs  of 
the  people — neither  causing  an  expansion  of  money  at  one  time,  or  con¬ 
traction  at  another — leaving  the  regulation  of  the  paper  money  to  the 
banks,  and  to  the  States  who  have  assumed  the  responsibility  of  authoriz¬ 
ing  such  issues.  If  it  be  asserted  that  a  number  of  the  prominent  men 
of  the  nation,  who  have  heretofore  expressed  opinions  favorable  to  tha 
State  bank  deposite  system,  are  now  opposed  to  it,  the  answer  is,  that  the 
system  had  not  then  been  fully  tried;  and  that,  when  if  was  found  to  be 
utterly  defective  and  wanting  in  all  the  requisites  necessary  for  the  safe¬ 
keeping  of  the  public  funds,  they  at  once  abandoned  it.  But  by  a  strange 
inconsistency  in  the  human  character,  many  of  our  public  men  who  had 
denounced  and  prophesied  all  manner  of  evil  of  what  they  termed  the 
pet  bank  system,  only  became  convinced  of  its  worth  and  value,  when 
these  depositories  of  the  public  money  proved  fraudulent  to  their  trust, 
and  spread  ruin  and  desolation  through  the  land.  Among  the  names  that 
stand  out  in  bold  relief,  we  find  those  of  Henry  Clay,  John  Quincy  Adams, 
and  Daniel  Webster. 


14 


If  it  be  asserted  that  our  country  has,  during  the  whole  period  of  her 
connection  with  the  State  banks,  prospered  beyond  example,  the  answer 
is,  that  our  prosperity  was  owing  to  far  different  causes,  and  that  our 
natural  resources  are  such  as  to  cause  us  to  flourish,  despite  of  that  con¬ 
nection.  It  would  be  hard  to  show  that  the  failure  of  one  hundred  and 
sixty  banks,  between  1811  and  1830,  added  any  thing  to  the  wealth  of 
the  country;  and  equally  difficult  would  it  be  to  prove  that  the  recent  fail¬ 
ure  or  suspension  of  every  bank  in  the  Union  was  a  measure  calculated  to 
advance  the  prosperity  of  the  people. 

It  may  be  said  that,  if  it  be  proper  for  the  State  to  receive  paper  money 
in  payment  of  taxes,  the  like  reasons  would  apply  to  the  General  Govern¬ 
ment;  but  there  is  no  analogy  in  the  cases.  For  the  State  Government 
to  refuse  the  notes  of  banks  in  which  she  has  so  large  an  interest,  and  over 
which  she  has  a  direct  control,  would  be  to  discredit  her  own  paper,  and 
injure  her  own  resources,  and  might  be  likened  to  the  General  Govern¬ 
mentrefusing  to  take  Treasury  notes  in  payment  of  the  public  dues.  A 
recent  defalcation  of  a  collector  of  the  customs  is  adduced  as  an  argument 
showing  the  dangers  of  the  Independent  Treasury  sj'stem.  That  defal¬ 
cation  commenced  while  the  Bank  of  the  United  States  was  the  fiscal  agent 
of  the  Government — was  extended  under  the  State  bank  deposite  system — 
and  was  finally  detected  under  the  present  temporary  Independent  Trea¬ 
sury  system. 

The  unconstitutionality  and  danger  of  a  National  Bank  are  sufficient 
to  warrant  your  committee  in  an  unqualified  opposition  to  such  an  institu¬ 
tion;  and  if  evidence  of  its  unconstitutionally,  danger,  and  inutility,  is 
asked  for  by  its  friends,  they  are  respectfully  referred  to  the  speech  of 
Htnry  Clay,  delivered  in  Congress  in  1811. 

Your  committee,  therefore,  concur  in  so  much  of  Governor  Carlin’s 
inaugural  address  as  has  reference  to  the  currency;  and,  in  conclusion, 
report  the  following  resolution: 

Resolved !,  That  our  Senators  be  instructed,  and  our  Representatives  re¬ 
quested,  to  vote  for  any  bill  having  for  its  object  the  disconnection  of  Bank 
and  State. 

E.  M.  DALEY, 

J.  WILSON  GOUGE, 
ISAAC  P.  WALKER, 

WM.  COMPHER. 

* 


i 


